Friday, November 16, 2012

Weekly Wrap | It's Going Down

Although there was a pop on Friday afternoon due to news reports about the fiscal cliff possibly being avoided, the S&P 500 fell 20 points from last week, down another 1.4%, to end the week at 1360.

But something else piqued my interest this week. Sometimes you have to look for subtle clues in order to get a sense of market sentiment, and I think I discovered something.

As the stock markets tanked this week, I got a quiet sense of desperate fear being reported through financial mainstream media in the form of "more than usual" bullish and optimistic posts, especially later in the week, in order to stem the flee. The crowning clue was when CBS This Morning stopped airing their usual stock market updates across the bottom of the television screen.

It's like the word is being put out behind the scenes to spin the news in order to get people to focus on anything else but a falling market. Do anything to allay fears and keep investors playing the game. It's not like I can't understand their reasons to do anything to prevent another market meltdown, but I can't see how they're going to succeed. Investors will eventually see through their schemes.

The global slowdown has corporate profits falling, and that doesn't bode well for either stocks or for unemployment levels. And it's not like there's anything on the horizon domestically to cheer about economically, although some people are trying to be cheery. Even The Vanguard Group is putting a positive spin on flat or worsening economic data.

The only bright side anywhere economically is perhaps the housing market, but personally, I see that sector's short term growth leveling out or producing very slow growth at best.

Although the focus in the news has been the fiscal cliff, it isn't the only thing that investors should be worried about. The world has descended into even further chaos since my last post discussing our current problems. Recessions, riots, and violent demonstrations against austerity and corruption are increasing throughout Europe and South America, and we're on the verge of war in the Middle East.

So, you can buy into the spin and be the Huckleberry left holding the bag. But for me, I'm still going to remain in cash, and I'm still expecting even more stock market declines. It's going down.

7 comments:

Right when I say "it's going down", the stock markets rally this Thanksgiving week. According to MarketWatch.com -

["U.S. stocks ended higher on Friday and posted strong weekly gains, as encouraging economic reports from Germany and China buoyed the mood on Wall Street. Early indications of Black Friday sales pointed to momentum for U.S. retailers as they head into the all-important holiday season.

The Dow Jones Industrial Average rallied 172.79 points, or 1.4%, to end at 13,009.68; for the week, it gained 3.4%. The S&P 500 index climbed 18.12 points, or 1.3%, to 1,409.15, leaving it up 3.6% for the week. The technology-heavy Nasdaq Composite advanced 40.30 points, or 1.4%, to end at 2,966.85; for the week, it rose 4%."]

So, does this mean that I've changed my own personal outlook about where the markets are headed in the near term, and that I'm moving back into equities? Nope.

I still believe it's all a spin and that there's no good reason for the stock markets to surpass pre-recessionary levels. The predators are just trying to lure their prey in for the kill.

I'm remaining fully invested in cash even if the S&P 500 Index happens to irrationally climb to 1500. Because - that's the way I roll, never letting fear or greed overcome my sensibilities.

Via Nassim Taleb.. "Likewise, any last-minute deal to avoid the spending cuts and tax increases scheduled to go into effect on Jan. 1 isn’t likely to save us from economic turmoil. It would merely let us continue the policy mistakes we’ve been making for years, allowing us only to temporarily stabilize the economy rather than address its deep, systemic failures."

"The United States economy unexpectedly reversed course in the final quarter of 2012 and contracted at a 0.1 percent rate, the Commerce Department said Wednesday, its worst performance since the aftermath of the financial crisis in 2009."

The conspiracy theorist in me can't help but think that the current administration may be saying to themselves - "Hey, we better make sure that we don't have two consecutive quarters of negative economic growth in case 2013 1st quarter results are "unexpectedly" as bad as last quarter 2012. We don't need any panicky folks using that word "recession" at this time."

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "second" estimate released by the Bureau of Economic Analysis.

One striking feature of the March jobs report was the decline (again) in the labor force participation rate. If it had merely held steady from a year ago, the unemployment rate would have been 8.3% rather than 7.6%. So does the decline show a) something structurally wrong with the labor market such as not enough skilled workers, or b) lots of baby boomers heading off to retirement.

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Individual investor who's able to profitably divine truth from lies, foretell fact from fiction, channel investor psychology, mystically predict market movements, and ascertain the answers having never before seen the questions.